Tech & Sci
2019.06.19 18:36 GMT+8

Vietnam's industry tech push uneven

Updated 2019.06.25 22:50 GMT+8
By Rian Maelzer

Walk into your typical Vietnamese factory and you will see rows and rows of people assembling, testing, sewing or ironing by hand. Vietnam’s booming manufacturing sector and exports have been built on an abundant supply of cheap labor. But economists warn that the model isn’t sustainable. Already, Vietnam’s wages are rising fast.

"The competitive advantage of the cheap labor forces is rapidly declining so that Vietnam must change the priority to improve its competitiveness," says Le Dang Doanh, a former government advisor and one of the country’s most senior economists.

At least year’s World Economic Forum for Association of Southeast Asian Nations (ASEAN) in Hanoi, Vietnam’s prime minister spoke of the need for businesses in the country to adopt Industry 4.0 technology: automation, big data analytics, robotics, artificial intelligence. And some businesses, especially the bigger state-owned enterprises, are heeding the call.

In Danang city, the operations of state-owned Vinatex are like a microcosm of what Vietnam industry is, and what it needs to move toward. In one section, hundreds of workers frantically toil at sewing machines. In the other, thousands of spinning machines churn out yarn for the fabric the workers are turning into clothing. Robots vacuums clean the machines, while others replace the empty spools. There’s barely a human in sight.

State-owned firms have been adopting new technologies in Vietnam. /CGTN Photo

Other state-owned firms are looking for foreign assistance to get on board with Industry 4.0. Vinasoy uses the technology and knowhow of Swedish firm Tetra Pak to automate its production process.

"We have customers in Vietnam who have essentially nearly a 4.0 facility, from automated batch production to sensors on all processing to ensure automation on quality monitoring and control all the way through the filling machines when looking at integrating into a smart warehousing system as well," Tetra Pak’s managing director for Vietnam, Jeffrey Fielkow tells me.

Vinsoy uses Tetra Pak's augmented reality technology. /CGTN Photo

The Vinasoy plant I visit outside Hanoi is certainly heavily automated though I know I can’t see the most advanced technology like AI and big data analytics at work behind the scenes. But they do give me a demonstration. Vinasoy can use Tetra Pak’s augmented reality system for maintenance, starting with the technician donning a virtual reality headset.

"A global expert anywhere in the world can see through the lens of customer and see the problem they are facing," says Fielkow. "And automatically they can push to the customers’ augmented reality a design scheme of how to fix the problem and we can be right there with them."

Such work still requires specialized skills.

"The government has a clear role to play not only in improving the environment but also targeting the resources so that they have to specialize skills and areas of the labor market where in the future these skills will be required and are not being supplied right now," says Eric Sidgwick, country director for the Asian Development Bank.

And there’s another challenge. While state-owned enterprises are rapidly investing in technology, the private sector is lagging behind.

"The problem in Vietnam is 94 percent of the private businesses are small and very small. Only three percent are medium size and bigger," says Le Dang Doanh.

"Technically Vietnam is implementing already the e-banking and e-commerce and mobile payment but the use of e-commerce is still limited. It's around 4 percent of the total commerce value, compared to the ASEAN average of around 14 percent."

Vietnam has been slow to adopt e-commerce and online payments. /CGTN Photo

Matteo Vidiri of Mekong Economics says Vietnam’s government has also not done enough to encourage foreign investors to put more money into technology rather than just relying on the big, relatively cheap labor pool.

"Economists in general are talking moving from quantity to quality in foreign direct investment," Vidiri says. But he says the government is doing little to encourage or insist on more technology transfer by foreign firms "because they are scared about lowering the amount of investment."

Tetra Pak is certainly doing its part in raising the use of technology and increasing productivity in Vietnam’s food and beverage industry, and is finding state-owned enterprises at least to be receptive partners.

One of the key advantages of Industry 4.0 is that it is possible to adopt it gradually, one facet at a time. But the first step is to understand the need to make the shift, to understand what that shift entails and then to access help to make the transition, which economist Vidiri says is lacking.

If Vietnam is to remain competitive, more companies – especially private ones – are going to have to swiftly start following the lead of firms like Vinasoy and Vinatex, even if they only do it in small incremental steps for now.

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